Friday, April 15, 2005

Surely you can do better than that?
The New York Times argues in favor of the estate tax (look at that, I didn't even call it the death tax), and does a poor job of it:

The most commonly heard argument against the estate tax - that it represents unfair double taxation - is specious. First, the estate tax does not even kick in until the assets left at death exceed $1.5 million, or $3 million per married couple - and those exemption amounts will more than double by 2009. So most Americans never even have to think about the estate tax, let alone worry about it coming on top of some other tax.
Follow that logic? Because most Americans don't pay the tax, it can't be double taxation on those that do. No, of course you don't follow that logic because it's not logical. How many Americans pay a tax has nothing to do with whether it is taxing the same money twice or not. Next:
Second, much of the wealth transferred at death has never been taxed. That's because capital gains on assets like houses, stocks and bonds are not taxed until the asset is sold. Obviously, if you inherit, say, a house, its owner didn't sell it, so never paid any capital gains tax on it.
Ok, fair enough—sort of. There are two problems with this idea. First, if you want to tax the appreciation of this, say, house, then why does it need to be taxed as part of an estate? If you don't readjust the basis of the investment, then all you have to do is assess the inheritor for the full amount when and if s/he sells the property. That way you still get capital gains tax taken out of it the way you would normally. At the very worst, if you accept the premise that the gain made by the deceased should be taxed, assets like houses should be treated as a sale from the deceased to the beneficiary of the will. The inheritor should get the property, and pay only the going capital gains rate on the current value minus the previous basis. The basis is then readjusted. We don't need a separate tax to accomplish this, it can just be folded into current capital gains law.

The second problem with this piece is in the phrase "much of the wealth transferred at death has never been taxed." OK, but what about the stuff that has? Savings, and other similar forms of wealth, are taxed when they are earned, and then again when they are transferred to the next of kin? That is precisely what double taxation means.

The NYT tries to dismiss all of this with the wave of a hand, and a claim that "The only thing driving the push for repealing the estate tax is ideology." While that's absolutely right, that doesn't make it wrong. The only thing driving the civil rights movement was ideology. The only thing driving the gay rights movement, the anti-death penalty movement, and any other number of issues supported by the NYT are ideologies. These editors do not have a problem with ideology—though that's what they'd like you to believe—they have a problem with ideologies that conflict with their own.

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